Principal Issues: Whether a partnership, that is an employer, is a “person” for the purposes of the central paymaster rules provided by subsection 402.1(1) of the Income Tax Regulations (the “Regulations”).
Reasons: Subsection 402.1(5) of the Income Tax Regulations provides that a partnership is deemed to be a corporation for the purposes of the central paymaster rules provided by section 402.1. For the purposes of the Income Tax Act, subsection 248(1) provides that the meaning of “person” includes a corporation. Pursuant to section 16 of the Interpretation Act, this definition also applies to the Regulations. Therefore, where the employer is a partnership, the rules in Regulation 402.1 apply such that the salary or wages earned by an employee for the performing of a service in a particular province for the benefit of a corporation that is not the partnership employer are deemed to be salary or wages paid by the corporation to an employee of its permanent establishments in the province if the corporation and the partnership employer do not deal at arm’s length and the corporation has a permanent establishment in the province.